Accounting for election judge pay: What Minnesota cities need to know
September 26, 2022
As we approach another busy election season, many local cities and townships are revisiting the rules related to appropriately compensating and reporting election judge payments. Some basic items to remember about election judge wages are outlined below.
Reporting Form: W2 or 1099?
The League of Minnesota Cities (LMC), per IRS guidance, recommends paying all election judges as employees via payroll, reported on a Form W2. However, State and Federal income tax withholding is not required on election worker pay. In addition, Minnesota has a Section 218 Agreement in place, thus excluding election workers from FICA (Social Security and Medicare Tax) until an employee earns at least $2,000 in election worker pay for the calendar year. Once the threshold is met, however, employee and employer shares of FICA tax is due on ALL earnings, starting with the first dollar earned.
Payroll Reporting and Processing Guidelines
According to the IRS, employers will want to keep in mind the following related to payroll tax on election worker earnings:
- If it’s possible that an election worker may earn the Federal threshold amount ($2000) or more in a calendar year, a State or local government employer may choose to begin withholding FICA taxes on the first dollar earned. Doing so eliminates the need for calculating and attempting to recover the employee share of FICA taxes retroactively once the employee has met or exceeded the annual threshold.
- If the employer has been withholding tax but the employee earns less than the Federal threshold amount during the calendar year, the worker would be entitled to a full refund of the withheld employee FICA taxes and the employer would not be liable for any FICA taxes related to the exempt earnings.
- If the employer chooses not to begin withholding FICA taxes until after the worker has met or exceeded the Federal threshold amount ($2000), the the employer would be liable for the total amount of FICA taxes due, including the employee share which may be difficult to recover from the employee retroactively if they are no longer earning any wages.
It’s worth noting that IRS regulations do not require that a Form W2 be filed if the election worker earns less than $600 in total W2 compensation during the tax year and did not have any tax withholdings. Oftentimes, employers will elect to file the W2 anyway since it is easily generated in the payroll system, however it’s not technically required.
Finally, election judge wages are not subject to or eligible for PERA. As such, it’s important that a separate election judge payroll earning code/type be set up in the payroll software system to ensure that these earnings are excluded from all PERA calculations.
City employees who also perform election worker duties
Election worker pay for employees who provide other paid work for the government employer are also optional State or Federal withholding and exempt from FICA taxes up to the first $2000 of election worker pay.
For example, let’s say Center City pays a worker, Chris, $100 in 2022 for election worker services, and also employs Chris in another capacity in which he/she earns $10,000 (subject to income tax withholding and FICA). Chris’s election worker services are excluded from the Section 218 Agreement, and thus excluded from FICA and withholding requirements, but the non-election services are subject to all normal payroll tax withholdings. In summary, the $10,000 payment is subject to income tax and FICA withholding, but the $100 payment for election worker pay is not. In addition, because Center City made payments in 2022 to Chris equal to $600 or more, the City must report all payments as wages on Form W-2 per Sections 6041(a) and 6051(a). Separate Forms W-2 may be used for the two types of payments but it is not required.
More resources for city governments
Compensating election workers may, at first glance, seem simple enough, however compliance with all the rules and regulations can be challenging to navigate in the real world. Our advisors at Abdo are here anytime to answer questions you may have about the complexities of accounting for and administering election judge pay. You can also find helpful IRS resources at Election Workers: Reporting and Withholding (IRS).
Meet the Expert
Leah Davis, CPA
With experience and empathy, Leah develops customized solutions to help employers solve their people challenges.
Change Management Series: Is Your Team Ready for Change?
In this first article in our Change Management Series, we’re...